Florida audit rules
Construction exemptions, subcontractor proof and disputes.
Learn more →California workers' comp audit
Workers' comp audits in California: WCIRB rules, payroll and disputes
California does not use NCCI. Its class codes, payroll rules, officer limits and dispute steps come from the WCIRB. Here is what changes for your audit.
Quick answer
In California, the Workers' Compensation Insurance Rating Bureau of California (WCIRB) is the licensed rating organization. It maintains the Standard Classification System in the California Uniform Statistical Reporting Plan (USRP), a regulation approved by the Insurance Commissioner. Your carrier's auditor applies those rules when it counts your payroll by class code.
Most payroll rules look familiar: tips and employer contributions to group insurance or retirement plans are excluded, and the premium part of overtime is excluded only when your records show it. What is different is the detail. Executive officers count at a yearly minimum and maximum set by the WCIRB, and several construction trades have dual wage classes, where the class depends on each worker's hourly wage.
If you disagree with the audit, you dispute it in writing with the carrier (or with the WCIRB for a WCIRB decision), and can then appeal to the California Department of Insurance's Administrative Hearing Bureau.
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How California counts payroll at audit
From the WCIRB's payroll guide and the USRP. Limits shown are for policies effective on or after 9/1/2026.
| Item | California rule | What to keep |
|---|---|---|
| Overtime | The straight-time part is payroll. The premium part (one third of total overtime pay at time-and-a-half) is excluded only if records show it | Payroll records that show, by employee and by type of work, either regular pay plus the overtime premium, or regular pay for non-overtime hours plus total overtime pay |
| Tips | Tips paid by customers, not the employer, are excluded | Tip reports kept apart from wages |
| Benefits | Employer payments to group insurance, qualified retirement and deferred compensation plans are excluded. Employee 401(k)-type deferrals are payroll. Section 125 amounts are excluded only when shown separately by employee and by type of work | Plan statements and a payroll report with the deductions broken out |
| Per diem and expenses | Documented actual expenses are excluded. A flat per diem is excluded if it is reasonable and records show the job site required extra expense. A flat tool allowance is payroll | Job location records and expense reports for each per diem payment |
| Executive officers, partners, sole proprietors, LLC members (when covered) | Counted at no less than $66,300 and no more than $171,600 a year each, prorated by weeks for part of the term ($63,700 and $165,100 for policies from 9/1/2025) | Names, titles, ownership, actual pay and weeks in the role |
| Dual wage construction classes | The higher-wage class is used only if the worker's regular hourly wage meets the threshold, for example $46 for carpentry (5432), $40 for electrical wiring (5140), $35 for plumbing (5187) and $33 for roofing (5553) | Original time cards with the work done, hours per day and start and end times, or a valid union agreement with a roster |
California-specific mistakes that raise the bill
- Showing only hours of overtime, or one gross pay number, so the premium part cannot be excluded
- No time cards for carpenters, electricians, plumbers or roofers paid above the threshold, so their payroll goes into the low-wage class, which usually has the higher rate
- Using last year's dual wage thresholds after they change on 9/1
- Leaving an active officer's pay off the estimate, or forgetting the yearly minimum applies even when the officer drew less
- Assuming an officer is excluded without a signed written waiver on file
- Missing the 12-month window to ask the WCIRB to review a classification
California audit checklist
- Find your policy dates and check which year's officer limits and dual wage thresholds apply (they change on 9/1).
- Pull payroll by employee with regular pay and overtime premium in separate columns.
- For each dual wage trade, gather original time cards with hours, start and end times and the work done, and work out each worker's regular hourly wage.
- List every officer, partner or LLC member with title, ownership, pay and weeks active, plus any written coverage waiver.
- Break out tips, per diem, Section 125 deductions and tool allowances in their own pay codes.
- Collect certificates of insurance for every subcontractor for the dates of the work.
- Keep the auditor's worksheet and the final audit results, and check each class code line against your records.
How a California audit dispute works
Put each step in writing and keep copies. Deadlines below are from the USRP and the Department of Insurance regulations.
- Send a written dispute to your insurer's designated office, with the records that support the change. For a WCIRB decision, such as a classification from a WCIRB inspection, use the WCIRB's process instead.
- To have the WCIRB review a classification, your first request must reach the WCIRB within 12 months after the policy expires. If you disagree with its decision, file a Complaint and Request for Action within 60 days.
- If the insurer or the WCIRB rejects your complaint, appeal to the California Department of Insurance's Administrative Hearing Bureau on its Workers' Compensation Insurance Policy Appeal form, within 30 days after the rejection is served.
Keep reading
New Jersey audit rules
CRIB rules, tips as payroll, officer limits and appeals.
Learn more →New York audit rules
NYCIRB rules, officer limits, the construction cap and appeals.
Learn more →Pennsylvania audit rules
PCRB rules, full overtime, officer exclusions and appeals.
Learn more →Texas audit rules
NCCI rules with Texas codes, non-subscribers and disputes.
Learn more →Payroll reconciliation template
A free template that lines up the payroll register, Form 941s, and workers' comp payroll by quarter.
Learn more →Frequently asked questions
Does California use NCCI class codes?
No. California uses its own Standard Classification System, maintained by the WCIRB in the USRP. Code numbers and rules can differ from NCCI states, so do not copy a code from another state's policy.
Is overtime included in California workers' comp payroll?
The straight-time part is. The premium part is excluded only if your records show it separately by employee and by type of work. At time-and-a-half, the premium part is one third of total overtime pay.
What are the California executive officer payroll limits?
For policies effective on or after 9/1/2026, a covered officer counts at no less than $66,300 and no more than $171,600 a year. For policies from 9/1/2025 the limits were $63,700 and $165,100. The same limits apply to covered partners, sole proprietors and LLC members.
What is a dual wage class?
Some construction trades, such as carpentry, electrical wiring, plumbing and roofing, have a low-wage and a high-wage class. The high-wage class can be used only if records prove the worker's regular hourly wage meets the WCIRB threshold for that policy year.
Will my California audit be in person?
California requires a physical audit at least once a year for policies with a final premium of $10,500 or more. A physical audit can be done remotely, but it looks at original payroll records. Smaller policies with dual wage classes are also physically audited, unless the insurer physically audited one of the two prior policy periods on a renewal.
How do I dispute a California workers' comp audit?
Send a written dispute to your insurer's designated office with supporting records. For WCIRB decisions, use the WCIRB's process. If you are turned down, you can appeal to the Department of Insurance's Administrative Hearing Bureau within 30 days.
Sources
Official rating bureau and state agency pages this guide is based on.
- WCIRB: Role of the WCIRB
- WCIRB: Payroll or remuneration
- WCIRB: Executive officers and partners
- WCIRB: Dual wage classification thresholds by year
- WCIRB: California Uniform Statistical Reporting Plan (USRP)
- WCIRB: Dispute process
- WCIRB: Physical audit requirements
- California Department of Insurance: Appeal process
Important scope note
Practical prep guidance only.
This page summarizes California rules published by the WCIRB and the Department of Insurance for audit prep. It is not legal, tax or insurance advice, it is not a ruling on your policy, and the USRP and your carrier's audit are the final word.
Get your California records in order before the auditor calls
Start with the free checklist, check the likely bill with the estimator, or use the workbook to keep payroll, officer pay, time cards and subcontractor COIs in one file.